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Brexit Update – Are Johnson’s Days Numbered? The EU Shall Decide…

Bob Mason

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Things haven’t gotten much better for the Pound as Brexit woes continue to trouble the Pro-Remainders and the Sterling bulls.

Following Johnson’s meeting with Juncker and Barnier on Monday, chatter from the EU has yet to become optimistic.

On Wednesday, the EU once again warned of Britain heading for a no-deal Brexit. All of this in spite of Parliament voting in favor of an extension should no deal be in place by 19th October.

While Parliament continues to go against the Tory Party, the reality is that the EU continues to hold the Brexit cards.

Juncker delivered a speech on Wednesday and, if Johnson thought that the Monday meeting was private, he would have gotten a rude awakening.

The European Commission President stated that Johnson had advised at the Monday meeting that Britain was leaving at the end of October, deal or no-deal…

Juncker’s comments suggested that the British PM is no nearer to a deal, with just a month remaining before new legislation requires the British PM to call for an extension.

The Irish backstop remains the stumbling block and will likely continue to be the stumbling block… The EU isn’t budging and neither is Ireland and that means a plausible alternative or an extension. That is assuming of course that EU member states unanimously vote in favor of an extension.

Interestingly, while Johnson doesn’t want an extension, the EU may compromise by agreeing to a shorter extension.

That really would leave Pro-Remainers with little wriggle room to force a general election and deliver a 2nd Referendum.

Even Labour Party leader Corbyn has started talking of neutrality on Brexit as opposed to being a Remainer. After forcing party members to side with the Pro-Remainers, they are now called to fence sit…

The opposition party may have blundered when considering the fact that Johnson was accused of choosing sides for political gain.

Just a week ago, Corbyn was talking of the need for Britain to remain in the EU…

The Pound

Without much surprise, the negative comments from the EU Commissioner weighed on the Pound. Sterling was back down to $1.24 levels after having bounced to a current month high $1.25269 on Tuesday.

The markets have ultimately realized that, while Johnson is keen to find a solution, actually finding one is another story.

What Lies Ahead?

It’s last chance saloon for the British PM at the 17th – 18th October EU Conference.

If there’s no viable alternative to the EU’s Irish backstop proposal then it comes down to one of a few scenarios…

Will Boris Johnson break the law or will he resign or will he find another avenue to lengthen his political career.

Having made it to Number 10, he’s unlikely to give it up without a fight. But, what options are there for a PM on the ropes?

A number spring to mind and, in the interest of the Conservative Party, resignation would seem the best option.

The primary option may well be the least likely of outcomes, however, and that’s never good for the Pound.

With the EU standing its ground and Johnson realizing just how tough it is at the top, a no-deal Brexit is Johnson’s only card.

In a game akin to chicken, the British PM has even lost the threat of a no-deal to instill panic across the EU.

So, an extension, a second referendum, an LDP – Labor Party coalition and a no-Brexit seems to be the favored route.

That is assuming, of course, that Britain would vote to stay the 2nd time around… There is no guarantee of that. With the BoE policy decision tomorrow, betting on the Pound could prove to be another bruising experience.

This article was originally posted on FX Empire